Welcome to the Asia Pacific Morning Brief—your essential overview of overnight crypto developments influencing regional markets and global sentiment. Today’s edition summarizes last week’s events and forecasts for this week, presented by Paul Kim. Pour yourself a green tea and stay tuned.
The cryptocurrency market experienced a rally following Federal Reserve Chair Jerome Powell’s speech at Jackson Hole last week. Although Powell’s policy announcements seemed hawkish, his altered tone regarding employment concerns boosted investor optimism. Bitcoin rose by 4%, while Ethereum climbed over 13%, as markets began to anticipate a rate cut in September.
A Market Reversal: All Eyes on Fed’s Pivot
After digesting Jerome Powell’s highly anticipated speech at Jackson Hole, the cryptocurrency market turned bullish last week.
Powell’s perceived shift in tone and growing expectations for a September rate cut propelled risk assets, including Bitcoin, even amid his potentially hawkish statements.
Initially, there were fears of a long-term hawkish approach from Powell’s speech, but the market response was unexpectedly positive. Bitcoin rose about 4% and Ethereum more than 13% as investors focused on his subtly altered demeanor rather than the hawkish content.
The Fed signaled an end to its “Average Inflation Targeting” (AIT) framework in a notable policy change, which had previously allowed for moderate inflation above the 2% target. They indicated a cautious stance, requiring significant weakness in the labor market before considering rate cuts.
These adjustments appeared bearish on paper, complicating the prospects for future monetary easing. Despite this, the market rallied primarily due to Powell’s notable change in tone.
During the July FOMC meeting, Powell had firmly focused on inflation, clearly rejecting the idea of imminent rate cuts. However, at Jackson Hole, he repeatedly pointed out the downside risks to the labor market and emphasized the necessity for policy adaptations, which many interpreted as a signal for potential rate cuts.
He also minimized concerns regarding possible price increases stemming from the Trump administration’s tariff policies, describing them as “transitory.” He argued that a cooling labor market would prevent these temporary shocks from evolving into sustained inflation.
This was broadly viewed as a signal that the Fed is now prioritizing employment stability over strict inflation control.
September Rate Cut a “Done Deal”?
Comments made shortly after Powell’s address strengthened the market’s optimism. James Bullard, former president of the St. Louis Fed and a significant figure in monetary policy, stated in a CNBC interview that Powell’s remarks effectively suggest a 25-basis-point rate cut in September.
Bullard’s insights cleared any remaining doubts for many investors, further stoking anticipations of an easing cycle by proposing the possibility of up to 100 basis points in cuts through the following year.
Powell cautioned that any prospective cut should not be seen as initiating a prolonged easing cycle. “Come what may, we will not allow a one-time increase in the price level to evolve into a sustained inflation issue,” he declared. This indicates that the Fed might consider only a maximum of two cuts this year.
Nonetheless, opinions remain divided regarding the necessity of further rate reductions. Kansas City Fed President Jeffrey Schmid, in an interview with Yahoo Finance, highlighted that while the labor market is softening, he believes inflation is still closer to 3% than the 2% target and warns against premature easing.
Schmid argued, “We still have a significant distance to cover to guide inflation toward 2%. Lowering rates too soon could reignite demand and empower firms with greater pricing authority.”
Cleveland Fed President Beth Hammack pointed out that inflation is still excessively high and rising, while the labor market remains stable around 4.2% unemployment. In her interview with Yahoo Finance, she stated, “If the meeting were tomorrow, I would not see a rationale for reducing interest rates.”
Ethereum Outshines, But Can it Last?
Last week showcased a clear divergence in the crypto market, with Ethereum’s strength eclipsing a tepid Bitcoin performance. Despite the optimistic macro conditions following Jackson Hole, Bitcoin concluded the week down 2.56%, reflecting a steep drop of approximately $10,000 over ten days.
Conversely, Ethereum registered a weekly gain of 8.98%, with indications of renewed buying interest from Digital Asset Trading (DAT) firms.
This trend was mirrored in US spot ETF flows. According to Farside Investors, Bitcoin spot ETFs encountered significant net outflows of $1.178 billion last week, whereas Ethereum spot ETFs saw notably smaller net outflows of only $241.1 million.
While some analysts, such as those at VanEck, maintain a bullish year-end price target of $180,000 for Bitcoin, the prevailing market momentum appears to lean in favor of Ethereum.
This Week’s Key Indicator: August PCE Inflation
Just before the start of Asian daytime trading on Monday, Bitcoin plummeted to a six-week low of $110,600, wiping out Friday’s gains. Most altcoins, including the previously robust Ethereum, were pulled down along with Bitcoin’s abrupt decline. Bitcoin briefly recovered above $113,000 but fell back as of the latest reports.
Though Powell has opened the door for a September cut, his cautious tone indicates that the decision is not yet finalized. The market’s global response today, as the enthusiasm from Friday dwindles, will set the tone for risk assets this week.
Despite Ethereum’s vigorous momentum, some market analysts express caution about a possible “September slump.”
This upcoming Friday is set to be significant. The August Personal Consumption Expenditures (PCE) price index, the Fed’s preferred inflation measure, will be released, alongside the University of Michigan’s inflation expectations survey.
These two indicators will provide vital insights for assessing the economic landscape ahead of the September FOMC meeting. We wish all our readers a productive week of investing.
The post Bitcoin Drops Under $113K As Post-Fed Rally Quickly Unwinds appeared first on BeInCrypto.
